Ben Murrey, Energy, Environment, Governor Polis

Murrey: Energy ratepayers on the hook when renewables fail

At his State of the State Address last week, the governor reemphasized his position against oil and gas in Colorado saying, “Transitioning to renewable energy isn’t just the right thing for our health and safety—it’s the smart thing for jobs and our economy.”

If coercing Xcel Energy to buy a massive bundle of natural gas at exorbitant prices to protect Colorado homes from going dark because of failing, frozen wind turbines is a smart thing for the economy, then the governor must be thrilled.

When demand for energy spiked earlier this month at the same time that wind and solar generation fell due to snow and extreme cold–not only here in Colorado but around the nation–Xcel Energy was forced to buy $650 million dollars’ worth of natural gas to keep Colorado’s lights on and homes warm.

Simply, when solar and wind failed, fossil fuel had to come to the rescue. Because renewables are often unreliable when they’re needed most, demand for natural gas skyrockets in the kind of severe weather events recently experienced. This led to high costs for natural gas that will likely get passed on to ratepayers.

Despite warnings of large cost increases to working families, Governor Polis continues his assault on natural gas and his push for an increased reliance on unreliable renewables.

Obviously, nobody can control the weather. Our elected officials, however, can control energy policy, and the policies pushed by Governor Polis only exacerbated the problem.

With the passage of Senate Bill 19-181 and ensuing regulations on the oil and gas industry, elected officials, the governor, and state regulators have worked overtime make it harder for natural gas producers in the state to put more gas to market. The legislation has and will continue to discourage production of natural gas in the state, forcing utilities to continue purchasing the commodity at a higher price from out-of-state when renewables fail.

Do utility companies worry about the price? Given that they’ll pass the cost to you, the ratepayer, with a government-guaranteed profit margin on top of it, why would they?

Conditions forced Public Service Company of Colorado (PSCo), the subsidiary of Xcel Energy operating in Colorado, to pay $650 million in excess costs for natural gas and electric fuel to supply ratepayers with heat and power that renewables could not supply, according to their latest filing with the United States Securities and Exchange Commission (SEC).

But don’t fret if you hold shares in Xcel. They will make sure ratepayers are stuck with the bill for Polis’s economic engineering in the energy sector.

The annual 10-K report to shareholders released by PSCo signaled—in cryptic legalize—that the company will lobby the Colorado Public Utilities Commission to ensure ratepayers bear the burden rather than shareholders.

“PSCo has fuel recovery mechanisms to recover the increased cost of natural gas and electricity,” the report explains. “[W]e intend to work with our commission to recover these costs over time to help mitigate the impacts on customer bills.”

“Fuel recovery mechanism” is lawyer speak for filing a “rate case”—a request with the commission to raise energy rates. The filing explains that because the pandemic has made it difficult for many ratepayers to pay their bills, the company expects that the commission will “undertake a heightened review” of that request. Xcel promises to urge the commission to put the burden on ratepayers but spread it out over a longer period of time to soften the blow.

In other words, ratepayers will pay the price, not Xcel and not its shareholders.

PSCo warned shareholders in their SEC filing that the utility company is “subject to public policies that promote competition and development of energy markets.” They’re exactly right, and so are Colorado ratepayers. Governor Polis should take note before continuing to block development of one of the most abundant, reliable, and cleanest energy sources available in the state.

Ben Murrey is fiscal policy director at the Independence Institute, a free market think tank in Denver.

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